VALUATION HIGHLIGHTS

1. Products constitute 73% of the Trefis price estimate for Cisco's stock.
2. Network Services constitute 27% of the Trefis price estimate for Cisco's stock.

WHAT HAS CHANGED?

1. Latest Earnings - Q1'26

Cisco delivered a strong start to fiscal 2026, reporting total revenue of $14.9 billion, up about 8% year-over-year, driven by robust product demand. On the profitability front, non-GAAP earnings came in at $1.00 per share, a 10% increase compared to the prior year, comfortably above expectations, while GAAP EPS was $0.72, up 6%. The strength was underpinned by a 10% rise in product revenue (to roughly $ 11.1 billion) and a modest 2% increase in services revenue.

Cisco disclosed roughly US$1.3 billion in AI-infrastructure orders from hyperscaler customers, underscoring the growing shift toward AI-driven data-center and cloud workloads.

Note: Cisco's FY'25 ended on July 26, 2025.

2. Outlook

Cisco raised its full-year FY2026 outlook after a stronger-than-expected Q1, now projecting US$60.2–61.0 billion in revenue and US$4.08–4.14 in non-GAAP EPS as demand accelerates across AI-infrastructure and enterprise networking refresh cycles. For Q2 FY2026, the company guides to US$15.0–15.2 billion in revenue and US$1.01–1.03 in non-GAAP EPS, reflecting confidence in its growing AI hyperscaler pipeline — including roughly US$1.3 billion in Q1 AI-infrastructure orders — as well as a multi-year upgrade cycle across switching, routing, and Wi-Fi 7 hardware.

BUSINESS SUMMARY

Cisco designs and sells networking and communications technology and services. It creates networking equipment such as switches and routers used primarily by businesses and Internet service providers to route data such as emails, videos, files, and other digital communication. For example, an email that you send to a distant friend travels through various switches and routers made by companies like Cisco, Juniper, Huawei, and Alcatel-Lucent along the path to its destination.

SOURCES OF VALUE

Infrastructure Platforms

Over the past few years, Cisco has had a roughly 60% market share in the Switches market (although the figure has declined in recent years). Similarly, Cisco's share in the router market has also been comfortably over 50% in recent years. Cisco's share in the enterprise WLAN market is also around 50%. The company's dominance in these market spaces is expected to continue in the coming years, with competitors commanding a significantly lower share in these markets.

Network Services

In addition to networking hardware, Cisco provides maintenance and support services to its customers to help them fix problems that occur with networking equipment. Cisco's network service revenues and profits are dependent on the installed base of Cisco switch and router equipment.